Investing in a company is no easy task. You are putting your hard-earned money in somebody else’s business and its natural to be afraid of burning your fingers in it. But is also an opportunity. You can grow leaps and bounds as the company grows and increase your own value as the value of the company is increased.
For great investors, investing in a company is more than about just money. It is a way to empower be a part of something that could truly change the market. Whether it is your first investment or your hundredth, it pays to take note of a few things before investing in a company.
It is the first thing to take note of. How much the company is currently valued at. Whether it is to crunch the numbers or know the lay of the land, it is imperative to know the company’s value before investing in it.
Its important to know the market cap or market capitalization of a company. Market capitalization is literally the cost of the company if you wanted to buy all the shares it has in the market. This helps you gauge how much you want to invest while not overpaying for a stock with no value.
How long you plan to own the stock
It is important to decide the sort of plan you have with the stock before investing in a company. There is a lot of differences between investing in company for a short term and going for the long haul. Some companies may be right for short term investment while some will only pay you dividends as time goes.
Five years is the absolute minimum for owning shares. If you have a plan of owning them for shorter then you can drop the whole idea. Most companies don’t pay dividends overnight. There are a few though whose dividends improve exponentially as time goes on.
The market share of a company decides the growth opportunity it possesses. Some companies have an enormous growth opportunity due to the potential of their market share. Investors need to know how they can help the company achieve success.
The company must have room to grow and it not only decides how much the company is going to grow but as to how much you are going grow as well.